Risk Sharing in Custom Cattle Feeding

Mark R. Weimar and Arne Hallam ()

Review of Agricultural Economics, 1990, vol. 12, issue 2, 279-291

Abstract: A simulation model is used to evaluate the risks and returns to feedlot operators and cattle owners in the upper Midwest that occur with alternative types of custom cattle feeding contracts. Historical price data were combined with seasonal performance data to analyze the seasonal incentives for different risk-sharing arrangements. Seasonal returns varied significantly both as to mean and variance and point out the need for seasonally varying contract terms. Feedlot owners are significantly better off with yardage fee contracts as opposed to cost-of-gain contracts in terms of return variance, whereas cattle owners are only slightly better off with guaranteed cost-of-grain contracts.

Date: 1990
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